Can you reduce your tax payments?
Can you reduce your tax payments “on account”?
Are you going to earn as much next year?
In the second of a short series we consider tax payment and planning issues to look at prior to the tax return filing deadline,
Nobody wants to pay more tax than they need to. If you have a high level of income or income not taxed under PAYE as an employee, then your tax return may show that you have a liability to make payments on account.
This may also result in you having to make additional payments on account for the coming tax year.
But if your income is not going to be as high next year or your circumstances have changed and you no longer have untaxed income, then you may not need to make those extra payments.
When you or your accountants complete your tax return you will know whether you have further tax to pay. This could be for many reasons which we won’t be able to cover in this short article.
Basically, if you are requested by HMRC or are registered and need to file a tax return then any otherwise untaxed income will be payable by you.
You have to make 2 payments on account every year unless:
- your last Self Assessment tax bill was less than £1,000 or
- you’ve already paid more than 80% of all the tax you owe, for example through your tax code or because your bank has already deducted interest on your savings
Tax payments are due on account by 31 January and 31 July each year. If the payments on account are insufficient, because they are estimated, then you have to pay any balance on 31 January following the end of the tax year and you make this payment together with the payment on account for the next tax year.
Unpaid/late paid tax will be subject to interest charged by HMRC, currently at the rate of 3%
HMRC calculate the payments on account for next year on the assumption that your income is the same as it was last year.
Each payment is half your previous year’s tax bill. Payments are due by midnight on 31 January and 31 July.
If you still have tax to pay after you’ve made your payments on account, you must make a ‘balancing payment’ by midnight on 31 January next year.
Reduce your payments on account
If you know your tax bill is going to be lower than last year, you can ask HMRC to reduce your payments on account. You or your accountants can do this when you submit the current year’s tax return, or by applying to do so through your online HMRC account.
For further advice existing clients email us at support@anytime.uk.com or call 03333 110 230
For new enquiries contact us now
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